Question 1 (3 Marks)
Hilary is a well-known mountain climber. The Daily Terror newspaper offers her
$10,000 for her life story, if she will write it. Without the assistance of a ghost
writer, she writes a story and assigns all her right, title and interest in the
copyright for $10,000 to the Daily Terror. The story is published and she is paid.
She has never written a story before. She also sells the manuscript to the
Mitchell Library for $5,000 and several photographs that she took while
mountain climbing for which she receives $2,000.
Requirement:
Discuss whether or not the three payments are income from personal
exertion. Would your answer differ if she wrote the story for her own
satisfaction and only decided to sell it later?
Question 2 (2 marks)
Eric provides his employee with the use of a car for 183 days during the FBT
year. During this period the car travelled 16,000 km. Eric purchased the car last
year for $50,000. The employee contributed $1,000 towards the cost of running
the car and has provided Eric with relevant documentation.
Requirement:
Calculate the taxable value of the car fringe benefit using the statutory
formula.
Question 3 (5 marks)
Your client is a parent who lent $40,000 to her son to provide a short-term
housing loan. The agreement is that the son will repay $50,000 at the end of
five years.
The loan was made to the son without any formal agreement and without any
security provided for the sum lent. In addition, the client (the mother) has
informed you that she told her son that he need not pay interest. However, the
son repaid the full amount after two years and included in his payment an
additional amount which was equal to 5% pa on the amount borrowed. Only one
cheque was presented for the total amount.
Requirement:
Discuss the effect on the assessable income of the parent.
Question 4 (10 Marks)
Scott is an accountant who purchased a vacant block of land in Brisbane on 1
October 1980. On 1 September 1986, Scott built a house on the land. At the
time, the land was valued at $90,000 and the cost of construction was $60,000.
The property has been rented out since construction was completed. On 1 March
of the current tax year, Scott sold the property at auction for $800,000.
Requirement:
a) Based on the information above, determine Scott’s net capital gain
or net capital loss for the year ended 30 June of the current tax
year.
b) How would your answer to (a) differ if Scott sold the property to
his daughter for $200,000?
c) How would your answer to (a) differ if the owner of the property
was a company instead of an individual?
